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On 12th July 2018, John Glen, the Economic Secretary to the Treasury announced a delay to the rollout of a cold-calling ban to cover pensions and associated investment products.
The additional consultation period announced means that it will be mid-to-late Autumn before any formal legislation is enforced.
This led to widespread disappointment across both the industry and consumer groups who have seen a proliferation of scams relating to new pension freedoms.
The Background:
The pension reforms were announced in March 2014 by George Osbourne and came into force in 2015. They were designed to give freedom to over-55 savers to control their pension pots rather than being forced to buy an annuity. Over the preceding 10 years, annuity rates had been eroded by the post-2008, low-interest-rate policies of global central banks.
Over-55’s immediately started to take advantage of the new rules and the total amount of money withdrawn since the pension freedoms started in April 2015 now stands at over £15bn.
In addition to these additional freedoms for defined-contributions schemes, pension-savers are also choosing to switch out so-called “gold-plated” defined-benefit schemes so they can access their cash-equivalent value now.
The benefits and drawbacks of these freedoms is beyond the scope of this short piece. However, one thing is clear, the smell of this money has attracted the vultures.
The pension reforms were announced in March 2014 by George Osbourne and came into force in 2015. They were designed to give freedom to over-55 savers to control their pension pots rather than being forced to buy an annuity. Over the preceding 10 years, annuity rates had been eroded by the post-2008, low-interest-rate policies of global central banks.
Over-55’s immediately started to take advantage of the new rules and the total amount of money withdrawn since the pension freedoms started in April 2015 now stands at over £15bn.
In addition to these additional freedoms for defined-contributions schemes, pension-savers are also choosing to switch out so-called “gold-plated” defined-benefit schemes so they can access their cash-equivalent value now.
The benefits and drawbacks of these freedoms is beyond the scope of this short piece. However, one thing is clear, the smell of this money has attracted the vultures.
There is evidence of unscrupulous “ambulance-chasing” advisors chasing lucrative defined-benefit transfer fees in inappropriate cases (for example, British Steel workers in Port Talbot).
In addition, the increasing number of pension savers taking out drawdown pensions, without advice, are now being targeted by firms encouraging savers to reinvest their lump sums into unregulated, speculative investment schemes which are inappropriate for that client’s risk profile and investment experience. Pension scam victims lose an average of £91,000 according to the FCA and The Pensions Regulator.
The cold-calling ban, when enforced, should help restrict the activities of these unregulated providers but the Financial Conduct Authority and The Pensions Regulator provide an invaluable resource to help pension savers stay ScamSmart.
You may have already seen their latest TV adverts depicting the pension scammer enjoying a holiday using their victims’ pension funds.
Protect yourself by always following the FCA’s key guidance:
Check who you’re dealing with:
Reject unexpected calls or offers:
Don’t be rushed
Get impartial information and advice: In addition to the Scamsmart site there are lots of other organisations and sites which can help you:
For more information, follow the links above and always check the regulatory status of who you are dealing with.
SynerGIS is a trading name of Global Investment Strategy UK Ltd (GIS).
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Provided for informational purposes only. Not designed as advice. Speak to your IFA or tax advisor for advice tailored to your individual circumstances.
